The New York Times reports:
Rising prices for cooking oil are forcing residents of Asia’s largest slum, in Mumbai, India, to ration every drop. Bakeries in the United States are fretting over higher shortening costs. And here in Malaysia, brand-new factories built to convert vegetable oil into diesel sit idle, their owners unable to afford the raw material.
The food price index of the Food and Agriculture Organization of the United Nations, based on export prices for 60 internationally traded foodstuffs, climbed 37 percent last year. That was on top of a 14 percent increase in 2006, and the trend has accelerated this winter.
In some poor countries, desperation is taking hold. Just in the last week, protests have erupted in Pakistan over wheat shortages, and in Indonesia over soybean shortages. Egypt has banned rice exports to keep food at home, and China has put price controls on cooking oil, grain, meat, milk and eggs.
According to the F.A.O., food riots have erupted in recent months in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan and Yemen.
“The urban poor, the rural landless and small and marginal farmers stand to lose,” said He Changchui, the agency’s chief representative for Asia and the Pacific.
A startling change is unfolding in the world’s food markets. Soaring fuel prices have altered the equation for growing food and transporting it across the globe. Huge demand for biofuels has created tension between using land to produce fuel and using it for food.
A growing middle class in the developing world is demanding more protein, from pork and hamburgers to chicken and ice cream. And all this is happening even as global climate change may be starting to make it harder to grow food in some of the places best equipped to do so, like Australia.
In the last few years, world demand for crops and meat has been rising sharply. It remains an open question how and when the supply will catch up. For the foreseeable future, that probably means higher prices at the grocery store and fatter paychecks for farmers of major crops like corn, wheat and soybeans.
There may be worse inflation to come. Food experts say steep increases in commodity prices have not fully made their way to street stalls in the developing world or supermarkets in the West.
Governments in many poor countries have tried to respond by stepping up food subsidies, imposing or tightening price controls, restricting exports and cutting food import duties.
These temporary measures are already breaking down. Across Southeast Asia, for example, families have been hoarding palm oil. Smugglers have been bidding up prices as they move the oil from more subsidized markets, like Malaysia’s, to less subsidized markets, like Singapore’s.
No category of food prices has risen as quickly this winter as so-called edible oils — with sometimes tragic results. When a Carrefour store in Chongqing, China, announced a limited-time cooking oil promotion in November, a stampede of would-be buyers left 3 people dead and 31 injured.
Cooking oil may seem a trifling expense in the West. But in the developing world, cooking oil is an important source of calories and represents one of the biggest cash outlays for poor families, which grow much of their own food but have to buy oil in which to cook it.
Few crops illustrate the emerging problems in the global food chain as well as palm oil, a vital commodity in much of the world and particularly Asia. From jungles and street markets in Southeast Asia to food companies in the United States and biodiesel factories in Europe, soaring prices for the oil are drawing environmentalists, energy companies, consumers, indigenous peoples and governments into acrimonious disputes.
The oil palm is a stout-trunked tree with a spray of frilly fronds at the top that make it look like an enormous sea anemone. The trees, with their distinctive, star-like patterns of leaves, cover an eighth of the entire land area of Malaysia and even greater acreage in nearby Indonesia.
An Efficient Producer
The palm is a highly efficient producer of vegetable oil, squeezed from the tree’s thick bunches of plum-size bright red fruit. An acre of oil palms yields as much oil as eight acres of soybeans, the main rival for oil palms; rapeseed, used to make canola oil, is a distant third. Among major crops, only sugar cane comes close to rivaling oil palms in calories of human food per acre.
Palm oil prices have jumped nearly 70 percent in the last year because supply has grown slowly while demand has soared.
Farmers and plantation companies are responding to the higher prices, clearing hundreds of thousands of acres of tropical forest to replant with rows of oil palms. But an oil palm takes eight years to reach full production. A drought last year in Indonesia and flooding in Peninsular Malaysia helped constrain supply. Worldwide palm oil output climbed just 2.7 percent last year, to 42.1 million tons.
At the same time, palm oil demand is growing steeply for a variety of reasons around the globe. They include shifting decisions among farmers about what to plant, rising consumer demand in China and India for edible oils, and Western subsidies for biofuel production.
American farmers have been planting more corn and less soy because demand for corn-based ethanol has pushed up corn prices. American soybean acreage plunged 19 percent last year, producing a drop in soybean oil output and inventories.
Chinese farmers also cut back soybean acreage last year, as urban sprawl covered prime farmland and the Chinese government provided more incentives for grain.
Yet people in China are also consuming more oils. China not only was the world’s biggest palm oil importer last year, holding steady at 5.2 million tons in the first 11 months of the year, but it also doubled its soybean oil imports to 2.9 million tons, forcing buyers elsewhere to switch to palm oil.
Concerns about nutrition used to hurt palm oil sales, but they are now starting to help. The oil was long regarded in the West as unhealthy, but it has become an attractive option to replace the chemically altered fats known as trans fats, which have lately come to be seen as the least healthy of all fats.
New York City banned trans fats in frying at food service establishments last summer and will ban them in bakery goods this summer. Across the country, manufacturers are trying to replace trans fats. American palm oil imports nearly doubled in the first 11 months of last year, rising by 200,000 tons.
“Four years ago, when this whole no-trans issue started, we processed no palm here," said Mark Weyland, a United States product manager for Loders Croklaan, a Dutch company that supplies palm oil. “Now it’s our biggest seller.”
Last year, conversion of palm oil into fuel was a fast-growing source of demand, but in recent weeks, rising prices have thrown that business into turmoil.
Here on Malaysia’s eastern shore, a series of 45-foot-high green and gray storage tanks connect to a labyrinth of yellow and silver pipes. The gleaming new refinery has the capacity to turn 116,000 tons a year of palm oil into 110,000 tons of a fuel called biodiesel, as well as valuable byproducts like glycerin. Mission Biofuels, an Australian company, finished the refinery last month and is working on an even larger factory next door at the base of a jungle hillside.
But prices have spiked so much that the company cannot cover all its costs and has idled the finished refinery while looking for a new strategy, such as asking a biodiesel buyer to pay a price linked to palm oil costs, and someday switching from palm oil to jatropha, a roadside weed.
“We took a view that palm oil prices were already high; we didn’t think they could go even higher, and then they did,” said Nathan Mahalingam, the company’s managing director.
Growth in Biofuels
Biofuels accounted for almost half the increase in worldwide demand for vegetable oils last year, and represented 7 percent of total consumption of the oils, according to Oil World, a forecasting service in Hamburg, Germany.
The growth of biodiesel, which can be mixed with regular diesel, has been controversial, not only because it competes with food uses of oil but also because of environmental concerns. European conservation groups have been warning that tropical forests are being leveled to make way for oil palm plantations, destroying habitat for orangutans and Sumatran rhinoceroses while also releasing greenhouse gases.
The European Union has moved to restrict imports of palm oil grown in unsustainable ways. The measure has incensed the Malaysian palm oil industry, which had plunged into biofuel production in part to satisfy European demand.
Another controversy involves the treatment of indigenous peoples whose lands have been seized by oil plantations. This has been a particular issue on Borneo.
Anne B. Lasimbang, executive director of the Pacos Trust in the Malaysian state of Sabah in northern Borneo, said that while some indigenous people had benefited from selling palm oil that they grow themselves, many had lost ancestral lands with little to show for it, including lands that used to provide habitats for endangered orangutans.
“Finally, some of the pressures internationally have trickled down. Some of the companies are more open to dialogue; they want to talk to communities,” said Ms. Lasimbang, a member of the Dusun indigenous group. “On our side, we are still suspicious.”
Demand Outstrips Supply
As the multiple conflicts and economic pressures associated with palm oil play out in the global economy, the bottom line seems to be that the world wants more of the oil than it can get.
Even in Malaysia, the center of the global palm oil industry for half a century, spot shortages have cropped up. Recently, as wholesale prices soared, cooking oil refiners complained of inadequate subsidies and cut back production of household oil, sold at low, regulated prices.
Street vendors in the capital, Kuala Lumpur, complain that they cannot find enough cooking oil to prepare roti canai, the flatbread that is the national snack. “It’s very difficult; it’s hard to find,” said one vendor who gave only his first name, Palani, after admitting that he was secretly buying cooking oil intended for households instead of paying the much higher price for commercial use.
Many of the hardest-hit victims of rising food prices are in the vast slums that surround cities in poorer Asian nations. The Kawle family in Mumbai’s sprawling Dharavi slum, a household of nine with just one member working as a laborer for $60 a month, is coping with recent price increases for palm oil.
The family has responded by eating fish once a week instead of twice, seldom cooking vegetables and cutting its monthly rice consumption. Next to go will be the weekly smidgen of lamb.
“If the prices go up again,” said Janaron Kawle, the family patriarch, “we’ll cut the mutton to twice a month and use less oil.”"The Struggle for Palm Oil" (photos by Michael Rubenstein for The New York Times) In the developing world, cooking oil is an important source of calories and represents one of the biggest cash outlays for poor households. A steep rise in prices for palm oil has forced many families in Dharavi, a sprawling slum in Mumbai, India, to use less oil or even cut back on food:
Saturday, January 19, 2008
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A New, Global Quandary: Costly Fuel Means Costly Calories |
Saturday, June 16, 2007
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Globalization In Every Loaf |
The New York Times reports:
In a glassed-off area in the headquarters of Sara Lee, a handful of specialists study computer screens and flat-screen televisions beaming the latest weather reports and commodity prices. They are sourcing ingredients from all over the world to make Sara Lee’s assortment of breads, deli meats and microwaveable desserts.
The lowering of trade barriers more than a decade ago has pushed food companies to scour the globe for more exotic — or the cheapest — ingredients to compete in a more global marketplace, not unlike automakers shipping in parts from all over. But with America’s relatively permissible food-import rules and weak inspection regime, is the trend to assemble food from so many far-flung locations heightening the risks of contamination?
“Once ingredients are incorporated into processed foods, it is hard to check whether they come from overseas or to verify if there are any unsafe contaminants in the products,” said Michael F. Jacobson, executive director of the Center for Science in the Public Interest, a Washington lobby group. “This is increasing the chances that people will get unsafe food.”
The concerns of Mr. Jacobson and some in Congress are being stoked by the recent scandal involving pet food contaminated with an industrial chemical called melamine and imported from China, which has resulted in thousands of pets being sickened or killed.
Food industry executives say they understand the risks of foreign sourcing and are taking pains to mitigate them.
“Ingredients from overseas are not the issue,” said Robert Earl, senior director of nutrition policy at the Grocery Manufacturers of America, a trade group that represents many of the largest food processors. “The problem comes from incorrect practices from manufacturers that happen to be in another country.”
David L. Brown, Sara Lee’s vice president for procurement, said consumers should not be concerned. “We are going to do our homework,” he said, including vetting foreign factories and in some cases investing money to improve food-safety standards. “It is our responsibility to make sure what we are feeding people is safe. But the more variables you enter into, the more risk you have naturally. It is all about how you address those unknowns.”
The controls in place to ensure that foreign-sourced ingredients are safe “are evolving as the world changes,” Mr. Brown said.
Some people say they still have a long way to go. In the weeks since the pet food controversy broke, federal investigators have also discovered toxic toothpaste exported from China and melamine-laced ingredients for fish feed manufactured in Toledo, Ohio. The discoveries have prompted new calls by Congress to overhaul responsibility for America’s food-safety system, which is currently shared by the Food and Drug Administration, the Department of Agriculture and a grab bag of other agencies.
Critics say the F.D.A., which bears the bulk of the food-safety load, is woefully underfinanced and understaffed, and they note that fewer than 1 percent of imported food shipments undergo laboratory analysis. The number of food inspectors has decreased in the last five years.
The F.D.A. is exploring ways to use risk analysis to try to pinpoint food shipments that might pose hazards, The Wall Street Journal reported this week. Under the approach, countries and private companies might be required to provide the F.D.A. with more information about imported food.
The rise in imported ingredients has been accompanied by an explosion in imported food generally: food imports more than doubled in the last decade, to $79.9 billion, according to the United States International Trade Commission. Consumers can only guess from reading most labels that individual food products today contain ingredients from a handful of continents.
Despite having the world’s most expansive and efficient agricultural sector, America is hardly the only place where large food processors like Sara Lee, Kraft and General Mills have looked to acquire the dozens of ingredients that make up their microwaveable meals, processed cheeses, baked snack foods and breakfast cereals.
What trade commission figures show is that ingredients are streaming in from more than 100 countries, including China, India, the Philippines and countries in sub-Saharan Africa. In some cases, consumer demand for more ethnic foods in the United States is pushing companies to import harder-to-find foods from exotic locales, but in other cases the phenomenon is simply a function of the way modern processed foods are assembled. The imported ingredients include caseins and caseinates (enzymes found in milk that are used as milk protein substitutes for pizza cheeses) and gums and resins that are used as binders to, for example, give chicken nuggets a certain consistency.
The scope of the global food marketplace is evident on the Web site of the Institute of Food Technologists. There, for the last six years, the Food Technology Buyer’s Guide has offered places to buy ingredients from around the world.
Looking for stabilizers or thickeners? The buyer’s guide offers more than 100 companies that sell those products, including a dozen manufacturers in China. There are 27 companies that offer “release agents,” a food additive, based everywhere from India to Illinois, and the same number of manufacturers peddling “foaming agents,” available in Canada, China and the Netherlands, to name a few.
The food industry bristles at the notion that a greater diversity of foreign ingredient suppliers could increase risks for consumers. Executives at food companies say that they willingly bear the burden of ensuring the safety of their suppliers’ plants and products.
“It’s on us,” said Mr. Brown of Sara Lee. “We can’t sit around and wait for government to iron these things out. We have a responsibility to our consumers. We are the ones that have to step up and make the assurances.”
Representative Rosa L. DeLauro, a Connecticut Democrat, said that the discovery of melamine in pet food illustrated how standards are not being uniformly enforced in foreign plants. With the F.D.A.’s resources overtaxed and with the agency lacking much authority to regulate overseas practices, the responsibility does fall mostly to the food companies, she said. She has been pushing to establish a more powerful food safety agency separate from the F.D.A.
“We need to modernize our food safety system,” Representative DeLauro said in an interview. “The risks are only going to get greater with increased globalization.”
The demand for more imported ingredients has also been propelled by the quest of chain stores and food manufacturers to offer replicable taste. “If you are Pizza Hut, you want consumers in China to be able to taste the same exact pizza in Chicago,” said Catherine Donnelley, a microbiologist at the University of Vermont’s nutrition and food science department. “That kind of uniformity requires that you modify food. You can’t make a natural cheese and expect it to melt and brown consistently.”
Sara Lee’s push some five years ago to establish a national brand of bread helped spur the company to centralize its global ingredient purchasing. Different enzymes and protein sources, for example, are used to make the company’s popular “soft & smooth” breads, which are intended to deliver whole grain nutrition but have the taste and texture of traditional white bread.
In Sara Lee’s purchasing pit, called the “nerve center,” Mr. Brown encourages the team of 20 or so procurement specialists to engage in high-level discussions about energy prices, weather and agricultural commodity trends (like the ethanol boom) in charting purchasing strategies.
Two years ago, separate procurement operations in several cities were centralized here in Downers Grove. Today, up to a third of the hundreds of suppliers Sara Lee uses are based overseas or have foreign operations. Mr. Brown’s group focuses on about 30 countries. Cocoa comes from Africa, wheat gluten from Europe and, increasingly, China. Many of the food chemicals come from Asia, as does most of the honey.
“We could make a case for having something on every continent other than Antarctica,” he said.
